Question

A construction management company is examining its cash flow requirements for the next 7 years. The company expects to replace software and infield computing equipment at various times over a 7-year planning period. Specifically, the company expects to spend $6000 one year from now, $9000 three years from now, and $10,000 each year in years 6 through 10. What is the future worth in year 10 of the planned expenditures, at an interest rate of 12% per year?

Answer 1

Total expense= $104,022.6

Step-by-step explanation:

Giving the following information:

The company expects to spend $6000 one year from now, $9000 three years from now, and $10,000 each year in years 6 through 10.

The interest rate is 12%.

We need to use the following formula:

FV= PV*(1+i)^n

FV= 6000*(1.12)^9= 16,638.47

FV= 9000*(1.12)^7= 19,896.13

Total= $36,534.6

For the last three we need to use the following formula:

FV= {A*[(1+i)^n-1]}/i

A= annual deposit

FV= {10000*[(1.12^3)-1]}/0.12= 67,488

Total expense= 67,488 + 36,534.6= $104,022.6